In most situations, the closing is a formal meeting typically attended by the buyer, the seller, the buying and selling agents, and the representatives of the lender and title company.

Your buyers agent or real estate attorney should attend the closing with you, to advise you on the signing of papers, and to represent your interests at this final important meeting. You will be asked to sign numerous documents and affidavits. You will pay the closing costs assigned to you. Finally, you will be given the keys to your house.

Real Estate Agent  This may help

The HUD-1 Statement consists of two pages. Page one shows the parties, the property description, the lender, the settlement agent and a summary of the borrower's and seller's transactions.

Page two (Section L) itemizes the settlement charges for each party, including the broker's commission, loan closing costs, pre-paid items, escrow account set-up, and title and recording charges.

Normally, closing agents start at page two, explaining the charges, then go to page one.

The closing documents

A significant part of the process of closing is the explanation and signing of various documents.

HUD-1 Settlement Statement
This form, required by federal law, itemizes the services that are being provided, and lists the charges to the buyer and seller. It is filled out by the settlement agent who conducts the closing. Both the buyer and seller must sign it.

Truth-in-Lending (TIL) Statement
The Truth-in-Lending Statement is another document required by federal law that mortgage lenders must give to all loan applicants within three business days of receiving their initial application. Among other things, it discloses the annual percentage rate (APR), which reflects the cost of your mortgage as a yearly rate. This rate may be higher than the interest rate stated in your mortgage because the APR includes any points, fees, and other costs of credit. The TIL Statement also sets forth the other terms of the loan, including the finance charge, the amount financed, and the total payments required.

Should the actual APR differ by more than a small amount from the lenders original estimate, the lender must give you a corrected TIL statement no later than at settlement. The lender does not need to give you a new TIL statement if the estimated APR proves correct, even if other disclosures have changed. For this reason, it's a good idea to check with the lender shortly before closing to see whether all the TIL disclosures are still accurate.

You may be asked to sign numerous affidavits (for example, that it is your intention to occupy the property). These may be required by state law, by the lender, or by the secondary market agencies. If you provide false information, you run the risk the lender will cancel your loan, and you could face criminal penalties.

The deed
The seller must bring the deed to the closing. The deed is the document that transfers ownership from the seller to you. As discussed previously, you should have decided what name or names are to appear on the deed.

Real Estate Agent  Did you know?

Florida law requires the buyer to pay for doc stamps on the mortgage at closing, which are $0.35 per $100.

There is also an intangibles tax on the note of $2 per $1,000, which also must be paid by the buyer.

The note
The mortgage note represents your promise to pay the lender according to the agreed terms. Again, the terms of the loan are set forth, including the date on which your payments must be made and the location where they must be sent.

The note also details the penalties that will be assessed if you default (if you fall behind in paying the loan) and warns you that the lender can "call" the loan (require full payment before the end of the loan term) if you fail to make the required payments. The lender can also call the loan if you sell the house without prior written consent of the lender, or if you otherwise violate the terms of your note or mortgage.

The mortgage
The mortgage or "deed of trust" is the legal document that secures the note and gives the lender a claim against your house if you default on the note's terms. In effect, you have possession of the property, but the lender has partial ownership, called an encumbrance, until the loan has been fully repaid.

What the mortgage means to you

The mortgage restates the basic information contained in the note as well as the date of the final scheduled payment. It states the responsibilities of the borrower to pay the principal, interest, taxes, and insurance in a timely manner, and to maintain hazard insurance on the property without lapse. The mortgage will require you to maintain the property and not allow it to deteriorate.

The mortgage also states that if the borrower fails to comply with these requirements, the lender can demand full payment of the loan balance. Moreover, if the borrower defaults, the lender can foreclose on the property, and use the proceeds to pay off the outstanding loan, accrued interest, and the foreclosure costs. The borrower will receive anything left over after any liens (legal claims against a property) and second (or third) mortgages are repaid.

Allocation of closing costs

As discussed here, there are various costs that are likely to be paid by the buyer at closing, as well as throughout the course of your mortgage. Note, however, that the various closing costs can be negotiated between the buyer and seller, and should be specified in the sales contract. While it is possible to have an agreement in which the buyer or seller pays all closing costs, typically these costs are shared by both. Certain fees are typically paid by the buyer to the lender at closing.

Real Estate Agent  Did you know?

Some subdivisions and gated communities may impose homeowner's association fees, which you must pay at closing (for the first year's amount).

Loan origination fee
This fee covers administrative costs of processing the loan. It may be expressed as a percentage of the loan — for example, one percent of the mortgage amount.

Loan discount points
These are the "points" charged by a lender to adjust the yield on the loan to specific market conditions. Each point equals one percent of the mortgage amount.

Appraisal fee
This fee pays for the appraisal which the lender uses to determine whether the value of the property is sufficient to secure the loan should you default on it. The appraisal fee is usually paid during the loan processing and may show on the settlement sheet as "POC," or "paid on closing."

Credit report fee
This covers the cost of the credit report which the lender used to determine your credit-worthiness. Like the appraisal fee, you probably paid this fee when you applied for the mortgage.

Final reckoning and the bottom line
In calculating the total amount that the borrower must pay, the Settlement Statement begins with the sales price and adds the total closing costs for which you are responsible. Any prorated adjustments payable to you (as discussed above) are then added in. From this total is deducted your earnest money deposit, which has been held in escrow since the seller signed your purchase offer, and the principal amount of your mortgage or any existing loan being assumed. Any adjustments made payable by the seller are then deducted. The resulting figure is the amount you must pay at closing.

And now, you make your final signature.

Getting the keys to your new home

Real estate sales professionals say that the house keys are the one item that sellers most commonly forget to bring to the closing. You will want to make sure you get the keys for all the doors: attic, garage, shed, closets, and yes — the front and back doors.

When you have the keys in your hand, take a moment to enjoy how they feel. Notice how everybody in the room is looking at you, smiling with you. It's amazing how something that weighs so little can be worth so much. Your research, persistence, and hard work have paid off.


You are now a homeowner.

Local. Experienced.

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